Caike Chemical is a leading manufacturer of fine chemicals such as dyes and pigment intermediates. Its main products include DSD acid, DMSS, DATA, mononitrotoluene, etc., dye and pigment intermediates and pesticide intermediates. The company's main downstream customers include Transanhua Co., Ltd., Sun Chemical Ltd, Indulor, etc., and the company maintains long-term and good relationships with all customers. Key investment points: Environmental policies are becoming more stringent, and the competitive landscape is being optimized. Since 2010, the country's ability to implement environmental protection policies has been continuously strengthened, and it is difficult to treat waste in the chemical industry. It is expected that the competitive pattern will be further optimized in the future, and industry prosperity will improve. The company has invested a lot of money in the disposal of polluting emissions and has stricter control standards than industry policies, which is expected to stand out from the competitive landscape. The market size of various products is rising steadily. The production of DSD acid and DMSS, the company's main intermediates, has advantages in production process, scale, cost, etc. In 2014, the global market share of DSD acid and DMSS produced by the company reached 57.4% and 27.4% respectively, ranking first in the world. The company's gross margin has remained above 30% in recent years and has been rising steadily. The company started production of mononitrotoluene last year, further derived the intermediate industry chain, and effectively reduced the cost of DSD acid production through self-made PNT. As a leading enterprise, the company has a strong market voice, relying on advantages such as scale, technology, environmental protection, and industrial chain integration. As oil prices stabilize, average product prices rise, and market share increases, the company is expected to continue to grow in both revenue scale and profitability. Give it a “neutral” rating, with a target price of HK$4.42. The company is a leading domestic and global manufacturer of dye and pigment intermediates, and product sales are expected to grow steadily. At the same time, the company's nitro-toluene production capacity will increase by 100% to an annual production capacity of 80,000 tons this year. This move will greatly increase the company's pesticide intermediate production capacity and expand market share. We expect the company's 16/17 revenue to be $918 million and $966 million, net profit of $110 million and $123 million, respectively, and EPS of HK$0.26 and HK$0.29, respectively. Based on the current stock price, the company's valuation has shown its position as a leading enterprise. For example, if the company successfully expands production this year, the company's profitability and market share are expected to increase further. We gave the company a valuation of 17 times the predicted profit for 2016, with a target price of HK$4.42, covering the “neutral” rating for the first time. Risk disclosure: The price of oil is unstable, affecting the price of the company's products; demand in the downstream industry is sluggish.